May 10, 2013

JSW Steel puts Rs. 35,000 cr West Bengal steel project on hold

JSW Steel has put on hold plans to set up a
10 million tonnes steel plant in West Bengal as it has not been able to secure
long-term iron ore supplies for the Rs. 35,000 crore project.

"It is stalled right now, it's on hold.
Unless we are going to fix the iron ore matter, unless we have the visibility
of iron ore, we cannot move ahead. It's on hold," JSW chairman and
managing director Sajjan Jindal told PTI.

JSW is working with the Centre and state
government to secure iron ore mining lease, he said, adding, long-term
visibility of iron ore is required to begin construction of the plant.

When asked about any timeline for the
project, he said: "Nothing (is) in my control. The project is stalled at
the moment."

The West Bengal project of JSW, first
announced in 2007, has been getting delayed for various reasons. This included
a land acquisition row with the state government after Mamata Banerjee-led
government took charge in 2011. The issue has now been resolved and land
acquisition has been completed. However, the company has not been willing to move
further on any new project, including the ones in West Bengal, without securing
either long term iron ore supply agreement or a captive iron ore mine due to
its experience in Karnataka.

In Karnataka, the company runs a 10 million
tonnes (MT) steel plant but it neither has any captive mine nor any long term
iron ore supply agreement and the company has to source the ore from open
market.

For more than one and half years now, JSW has
been running the Karnataka plant at a reduced capacity due to iron ore crunch
in the state.

Currently, all ore in the state gets
auctioned due to a Supreme Court direction, thereby increasing the raw material
cost for the company.

According to original plan, JSW's West Bengal
project was envisaged to have a 10 million tonnes steel plant along with a
1,600 MW captive power plant at a total cost of Rs. 35,000 crore that requires
about 4,300 acres of land.

In the first phase, the company had plans to
set up a 3 MT steel plant and a 300 MW captive power plant with an investment
of Rs. 20,000 crore. The first phase was proposed to be financed at a
debt-equity ratio of 65:35.

Deallocation of Gourangdih ABC coal block
last year by the Coal Ministry is also an issue JSW is facing. The block,
allocated to JSW and Himachal EMTA jointly in July, 2009 would have provided
coal for the captive power plant of the Bengal plant.

JSW has challenged the deallocation of the
coal block in court and the matter is currently sub-judice.